Refinance Calculator
See if refinancing your mortgage can save you money on payments and interest.
Refinance Summary
Total Interest Comparison
| Metric | Current Loan | New Loan | Difference |
|---|
What is a Refinance Calculator?
A refinance calculator helps homeowners determine whether replacing their current mortgage with a new loan will save money. It compares monthly payments, total interest, and the time required to recover closing costs.
Refinancing can lower your interest rate, reduce your monthly payment, or shorten your loan term. However, closing costs and fees must be considered to ensure the switch is financially beneficial.
The sections below walk through the math so you can check any lender's offer; then run your own numbers above.
How to Use
- Enter your current loan balance, interest rate, and monthly payment.
- Input the new interest rate you have been offered and the desired new term.
- Add estimated closing costs for the new loan.
- Click Calculate to see your savings, break-even point, and interest comparison.
The Break-Even Formula
The key number in any refinance decision is the break-even point — the month your savings finally exceed the fees paid:
Break-even (months) = Closing costs ÷ Monthly savings
This calculator rounds up to the next whole month. The new payment itself comes from the standard amortization formula:
M = P × r(1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)
- M — monthly principal-and-interest payment
- P — loan principal (the balance being refinanced)
- r — monthly interest rate: the annual rate divided by 12
- n — total number of monthly payments (loan term in years × 12)
Worked Example: $300,000 Loan, Refinanced After 3 Years
Suppose you borrowed $300,000 at 7.5% on a 30-year fixed rate three years ago, and a lender now offers 6.0% on a new 30-year loan with $5,000 in closing costs.
- Original payment. M = $2,097.64 per month.
- Balance today. After 36 payments,
B = P(1 + r)ᵏ − M × (((1 + r)ᵏ − 1) ÷ r)with k = 36 gives $291,042.74. Only $8,957 of principal was repaid, and 324 payments (27 years) remain. Our amortization calculator shows the full schedule. - New payment. Refinancing $291,042.74 at 6.0% for 30 years gives M = $1,744.95.
- Monthly savings. $2,097.64 − $1,744.95 = $352.69.
- Break-even. $5,000 ÷ $352.69 ≈ 14.2 months, rounded up to 15 months.
| Metric | Keep Current Loan | Refinance at 6.0% |
|---|---|---|
| Monthly payment (P&I) | $2,097.64 | $1,744.95 |
| Remaining term | 324 payments (27 yrs) | 360 payments (30 yrs) |
| Total interest remaining | $388,593.76 | $337,138.64 |
| Closing costs | $0 | $5,000 |
| Total remaining cost | $679,636.50 | $633,181.38 |
Even after the $5,000 fee, this refinance saves $51,455.12 in interest — $46,455.12 net. Entering these numbers above reproduces the $1,744.95 payment, $352.69 savings, and 15-month break-even exactly.
Rate-and-Term vs. Cash-Out Refinance
A rate-and-term refinance replaces your mortgage with a new loan for roughly the same balance to get a lower rate, a different term, or both — the example above is one. A cash-out refinance borrows more than you owe and pays you the difference in cash, usually at a slightly higher rate, and spends down home equity. To model one, enter the larger new balance above; our mortgage calculator breaks down the new loan by itself.
Why Restarting the 30-Year Clock Can Cost More
A lower payment is not the same as a lower cost: a fresh 30-year term restarts amortization and adds years of mostly-interest payments.
At the extreme, refinancing the $291,042.74 balance at the same 7.5% for 30 years drops the payment $62.63 to $2,035.01, yet total interest climbs from $388,593.76 to $441,561.97 — about $52,968 more interest for a slightly smaller bill.
The fix: after refinancing to 6.0%, keep paying $2,097.64. The loan is gone in about 238 payments — under 20 years — with roughly $208,000 of interest, about $129,000 less than the 30-year schedule. A 20- or 25-year term builds in the same discipline.
Closing Costs and When Refinancing Is Worth It
Refinance closing costs typically run 2% to 5% of the loan amount — appraisal, origination, title, credit, and recording fees. On the $291,043 balance above, that is roughly $5,821 to $14,552 — the example's $5,000 is at the low end. At 2% of the balance, break-even stretches to about 17 months; at 5%, to about 42.
| Monthly savings | $3,000 costs | $5,000 costs | $8,000 costs |
|---|---|---|---|
| $100 | 30 months | 50 months | 80 months |
| $200 | 15 months | 25 months | 40 months |
| $300 | 10 months | 17 months | 27 months |
| $400 | 8 months | 13 months | 20 months |
| $500 | 6 months | 10 months | 16 months |
Rules of thumb:
- A rate cut of 0.75 to 1 percentage point is the classic threshold, but half a point can pay off on a large balance with low fees.
- Plan to keep the home well beyond the break-even month — ideally twice as long.
- The more years left on your current loan, the more a lower rate compounds.
- Avoid resetting the clock: match the new term to your remaining years, or keep paying the old amount.
- Compare Loan Estimates by APR, which folds most fees into one number, and get two or three quotes.
Frequently Asked Questions
What is the break-even point on a refinance?
Closing costs divided by monthly savings — the months needed for the savings to repay the fees. With $5,000 of costs and $352.69 of monthly savings, break-even is about 14.2 months, rounded up here to 15. Refinancing pays off only if you keep the loan well past that point.
How much are closing costs on a refinance?
Typically 2% to 5% of the loan amount — appraisal, origination, title, credit, and recording fees. On a $291,000 balance, roughly $5,800 to $14,600. No-closing-cost refinances exist, but the fees reappear as a higher rate or a bigger balance.
What is the difference between a rate-and-term and a cash-out refinance?
A rate-and-term refinance swaps your mortgage for one of about the same balance at a lower rate, a different term, or both. A cash-out refinance borrows more than you owe and pays you the difference in cash, usually at a slightly higher rate, reducing your equity.
Does refinancing reset my amortization?
Yes. The new loan starts a fresh schedule, so early payments are mostly interest again. Restarting a 30-year term several years in can raise lifetime interest even with a lower payment — compare total interest, not just the monthly bill.
Is it worth refinancing for a 1% lower rate?
The rule of thumb wants a cut of 0.75 to 1 percentage point, but break-even is the real test: on a large balance, half a point can repay low fees quickly; on a small balance or short remaining term, the same cut may never break even.
Should I refinance to a shorter term?
Shorter terms usually carry lower rates and much less total interest, but higher payments. If the payment fits your budget, moving from a 30-year to a 15- or 20-year loan is often the biggest long-term saver.
Are closing costs included in the new loan?
This calculator assumes closing costs are paid upfront. If you roll them into the new loan, the balance and payment rise slightly and you pay interest on the fees.